Stop Pro-Wall-Street Concessions in Financial "Reform" Bill

Chris Hayes warns us about the approaching castration of proposals to re-regulate Wall Street.

With healthcare reform passed, the next big legislative battle will be over financial regulation reform. Unlike the Affordable Care Act, which the nation followed from opening to closing credits, financial reform has been running in a largely empty theater. Many reporters and citizens find themselves walking into the show two-thirds of the way through, bewildered by its complexity. But the movie's not over yet, and the ending is undetermined. So it's important for progressives to understand the essential elements of financial reform.

Here's where we are. In December the House passed a comprehensive financial reform bill, crafted mainly by Barney Frank and the Treasury. The bill gets, at best, a B-. There are some strong provisions--an independent consumer protection agency and caps on leverage--and some gaping loopholes, such as exceptions for derivatives that render the new requirements largely moot. Even after Wall Street lobbyists had nibbled and chomped through it in committee, the Financial Services Roundtable and Chamber of Commerce still opposed it, which counts as no small point in its favor. The bill passed with--surprise!--zero Republican votes.

In late March, Chris Dodd steered his own version of financial regulation reform out of the Senate Banking Committee. Several months of negotiations with Republicans made the bill weaker than Frank's bill but didn't yield any Republican votes. (Sound familiar?) The bill will now go to the floor, where it can be amended. Since almost none of the bill can qualify for the reconciliation process, passage will almost certainly require at least one Republican defection. In other words, a weakened version of the already watered-down House bill will need to be diluted even further to pass. Here's what to watch for as Republicans and self-described centrists start bringing out the fire hoses.

SNIP

There are two ways of viewing the financial crash. One way is as a technical failure with a technical solution--adjusting the mechanisms of oversight, granting regulators new abilities, making market transactions more transparent and aligning incentives in a more productive fashion. That's largely the view taken by the Obama administration, and it's the logic that suffuses much of the pending legislation. The other way to view the problem is as a fundamentally political one with a singular root cause: the banks have too much power. From this perspective, the most important result of reform would be to reduce that power, something each of the three reforms above would help do.

Progressive critics of the healthcare reform bill like Bernie Sanders and Dennis Kucinich voted for it because they were persuaded that the bill moved things in the right direction and would provide immense relief and security to millions of Americans. With financial regulation, the banks aren't holding 30 million uninsured Americans hostage. And a bill that passes but doesn't reconfigure the political economy of the financial sector stands a good chance of making things worse, allowing Washington and Wall Street to go back to the status quo with a false sense of security that the problem has been solved. At this point, I think the House bill with stronger derivatives language would clear the bar. But throughout the next few months, the most important part of the fight to watch is how the banks react as the legislation develops. If the banks aren't fighting and squealing like hell, you'll know the reform isn't worth the paper it's written on. And if you see the main industry groups actually endorsing the final product, as, say, AHIP and PhRMA did with healthcare reform, then it's time to bring those "kill the bill" chants out of retirement.

Read the whole thing.

Then tell your members of Congress you demand nothing less than real financial regulation.